Householders face double digit rises in gas and electricity

Households across Britain face the prospect of a double-digit rise in fuel bills, with one of Britain's big six suppliers expected to announce increases today. The move by npower, which supplies more than 4m UK homes, will pave the way for others to follow suit.

An npower spokesman said the percentage increases would be in double digits for both electricity and gas.

The industry is expecting rises in domestic bills as a result of higher wholesale prices. Some companies have already withdrawn some of their cheapest deals, but npower's increases will mark the first reversal of a general round of cuts in mainstream domestic prices last spring.

Wholesale gas prices have been driven higher by oil costs, with crude touching $100 a barrel for the first time on Wednesday. Wholesale prices have also been driven up by European firms increasingly turning to the more liberalised UK market for supplies as a cheaper alternative.

A drop in wholesale energy prices in 2006 and early 2007 had enabled suppliers to cut bills, with British Gas becoming the first major UK energy company to announce decreases. Npower dropped its prices at the end of April 2007 and, up until today, has been the fourth cheapest of the six biggest UK energy suppliers, according to uSwitch.com.

Currently npower customers who pay their bills quarterly have average electricity bills of £377 a year and £552 for gas.

Tim Wolfenden, head of home services at uSwitch.com, said: "Until an announcement is made this is not a 'done deal' but price rises have been on the horizon for some time, so I don't think anybody will be particularly surprised by this speculation.

"Ever since British Gas and npower announced price increases on their market trackers and npower followed this up with a price hike on its online plan, it has been clear that prices are going to be heading north again, with the smart money on a 15% price rise. And once one of the suppliers makes this move it will give competitors the green light to go ahead with price increases of their own. This speculation could rapidly turn into price rise misery for consumers in 2008."

Joe Malonowski, at TheEnergyShop.com, said there was a case for an average increase of 10% in retail gas prices across the industry, because of rises in the wholesale market, but it was much harder to justify rises in home electricity bills.

Independent watchdog energywatch condemned npower's news. Spokesman Karl Brookes said: "Consumers are always being softened up with talk of 'unavoidable' price rises. The wholesale price for gas has risen, but all suppliers can decide to absorb more of that themselves rather than pass all the risk on to consumers. In the last year wholesale gas prices have fallen by 50% and, while the industry enjoyed the respite, they were in no hurry to share the benefits with consumers."